Asian countries begin to burst the oil bubble

One by one, countries across Asia and the Middle East are being forced to abandon price controls on fuel and energy, bringing hundreds of millions of consumers face to face with the true market cost of oil. The effect has already begun to chip away at world demand and may ultimately trigger a slide in crude prices.

Egypt – the most populous Arab state – has raised petrol prices by 40pc, despite protests in Cairo. Sri Lanka lifted diesel and petrol prices by 25pc over the weekend. India may have to follow soon to prevent its trade and budget deficits climbing to dangerous levels. “The situation is alarming. We need to stem the rot,” said India’s energy secretary, MS Srinivasan.


Indonesia has raised petrol prices by 33pc in order to restore fiscal discipline (subsidies are 3pc of GDP). Taiwan has mooted a 20pc rise, and Malaysia is to peel back controls. While China has so far resisted calls for price freedom, the policy is becoming unsustainable. Analysts predict a change in tack after the finish of the Beijing Olympics at the end of August.

The fast-changing politics of the emerging world has started to chill enthusiasm in New York and London for oil futures contracts. West Texas Intermediate has so far slipped $5 a barrel from its all-time high of $135 last week as hedge funds lock in profits, although analysts warn that it is too early to tell whether the 30pc spike in oil prices since March has burned itself out.

Telegraph